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Business Review 2006 from
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Property trends
John Carter
senior director, CB Richard Ellis
Twelve months on is a long time in any walk of life, but in the Jersey commercial property market the past 12 months have seen tremendous amount of activity in all sectors.
Commercial property transactions are split into various sectors such as investment acquisitions and disposals, leasing of offices, retail transactions and developments.
Overall, the commercial property market in Jersey is probably in one of the healthiest positions it has been in for some time given the activity that we have seen in the majority of sectors.
In terms of investment transactions, the past 12 months have probably seen the most activity that we have had in Jersey for a considerable number of years. As investors, this includes major financial institutions such as Legal & General and UBS Global Asset Management (UK) Limited, who have acquired some of the larger investment properties. Acquisitions have included two new offices premises on the Esplanade (the Bailhache Labesse building - 13-14 Esplanade - and the SG Hambros building - 18 Esplanade) and the Le Grande Marche supermarket.
As well as the institutional investors, there continue to be private investors and smaller property companies who compete with institutional investors.
New developments that have occurred in Jersey over the past few years, especially with the Esplanade area, have fuelled the investment stock that has been available to change hands.
The greater activity has exceeded the activity experienced in 2004 and part of this is due to the fact that some owners have been enticed to sell due to the higher prices achievable in this current buoyant market as well as the existence of investors wishing to consider an acquisition.
Liquidity
The liquidity of the commercial investment market is sometimes of concern to investors, particularly those with large investment requirements and certainly some of the major institutions are prepared to look only at investments in excess of £10 million.
The UK institutions still find Jersey an attractive investment area and there continue to be benefits in comparison to the UK with the more frequent rent review pattern being three yearly as opposed to five, traditionally longer leases of 15 years plus and a slight edge in investment yield, with prime Jersey office investments making between 5.5 and 6% whereas the prime office investment yields in the UK are in the region of 5%.
Turning to another sector, but staying with offices on the occupational side, again the past 12 months have seen an increasing amount of what was looking like a potential over-supply of accommodation being taken by occupiers.
While it is not formally documented, St Helier has an approximate total office space of two million square feet and the take-up over the past 12 months or so of what we would describe as top Grade A space is something in the region of 200,000 square feet, which is a mixture of lettings and pre-lettings on prime office accommodation along the Esplanade.
Recent occupiers of new headquarter-style buildings include Rathbones (17-19 Esplanade), Lloyds TSB (11-12 Esplanade - under development), Jersey Financial Services Commission (26 Esplanade - under construction) and AIB (26 Esplanade - under construction). There are various rumours of other major financial occupiers who are considering a move to the Esplanade and waterfront area.
A further sector that has been active is the retail market, over the past 12 months, has seen a number of new occupiers in the marketplace, particularly in the prime precincts of King Street and Queen Street.
New names on the block are Monsoon Men, a new large Accessorize store which replaced Etams, Bradley Jewellers, a new large Monsoon unit, Molton Brown, Jersey Pearl, Esprit, East and the relocation of Benetton. The recent acquisition of 63 King Street by Cable & Wireless additionally starts a trend of phone retailers in the prime retailing area.
There are a number of current vacant units, although all of these have interested parties on them, or are under offe. However, it is too early to name names.
The rental levels in King Street and Queen Street have generally been maintained for the larger retail units. However, for smaller units, there has been resistance by occupiers and in some instances we have seen retail rents fall or larger incentives granted on an assignment or letting.
The final sector is development, of which there is a tremendous amount.
Not only do we have the comings and goings on the Esplanade Square area and the St Helier waterfront as a whole, we also have the areas known as Liberation Wharf and Castle Quay, all of which will provide a mixture of offices, retail, leisure and residential.
Enticement
As mentioned, it is too soon to see what will finally be developed on the Esplanade Square and Castle Quays, which are still going through the early planning processes, but the Liberty Wharf scheme is under construction and will provide some 50,000 square feet of retail space, the new transportation centre, various apartments, a hotel, the new Tourism office and some 60,000 square feet of offices - rumoured to be part pre-let.
Whether the enticement of these retail units will shift the retail focus from King Street and Queen Street onto the Esplanade and waterfront area has yet to be seen.
However, I would envisage a continuity of businesses linking the existing town to the new areas.
All in all, while we have seen activity in all areas over the past 12 months, it is felt that future activity for the next year and beyond is going to confirm that the commercial property market in Jersey is healthy in all sectors for landlords, tenants and developers alike.
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